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Study: Spending Money on Others Makes Us Happy

Does money buy happiness? Researchers and bar-goers alike have long debated this slippery question.

The verdict is far from clear. Studies show that money does make people happier, but only up to a point. Beyond a certain level, additional income yields hardly any additional happiness. The United States, for instance, is four times wealthier than it was in 1950 yet Americans report being no happier than they were half a century ago.

A new study, published today in the journal Science, suggests that what matters most is not how much money we have but, rather, what we do with it. Spending money on others, it shows, can boost our own happiness.

The researchers first asked a group of college students how happy they were. They then gave the participants money — either $5 or $20. Half were told to spend the money on themselves. The others were told to spend it on others, such as giving a gift to a friend or making a charitable donation. That evening, the researchers again asked the students to gauge their happiness.

It turns out that the participants who spent money on others reported a much greater happiness boost than the ones who spent money on themselves. And, surprisingly, the amount of money the students were given didn't seem to matter at all. It was how they choose to spend it that determined their happiness levels.

A Little Giving Goes a Long Way

"This suggests that even making really small changes in how one spends money can make a difference for happiness," says Elizabeth Dunn, a professor of psychology at the University of British Columbia in Canada and one of the authors of the study.

In another study, the same researchers tracked the happiness levels of 16 employees who received a profit-sharing bonus. Again, the findings were the same: those who spent their bonus on others reported the greatest happiness boost.

"The size of the bonus turned out to not matter at all," says Dunn. "What mattered is how they spent the money."

The findings are far from ironclad, partly because they rely on "self reports" of happiness, and those are not always reliable. But there is a growing body of research that lends scientific credence to the old adage: it's better to give than to receive.

The Happiness Gap

"Just the fact that helping others makes us feel good — and I think that says something positive about human nature," says Dunn.

That may be, but another study suggests we're not very good at assessing human nature. Dunn and her colleagues asked a group of college students what they thought would make them happier: spending money on themselves or on others. The vast majority of respondents said: spending money on themselves.

Apparently, there is large chasm between what we think will make us happy and what actually does.